GSFMO privatizes its flour mills

WASHINGTON, D.C., U.S. — The Saudi Council of Ministers, chaired by King Salman, approved on Nov. 9, the establishment of four milling companies and restructuring the Grain Silos and Flour Mills Organization (GSFMO) under a new name, the General Organization for Grains (GOG),.

The GSFMO’s nine mills will be distributed among the four new entities by the Public Investment Fund (PIF) of the Ministry of Finance. Foreign investors will be allowed to compete with the Saudi investors to own and operate these flour mills.

The flour milling sector has been for several years targeted for privatization by the Saudi government. The new milling companies will serve as clients of the GOG to process and distribute wheat flour for fees to government-approved customers at agreed subsidized prices. The new mills would be allowed, if they so chose, to import their own wheat shipments for the processing of non-subsidized flour and the production of upscale quality bakeries and pasta.

“The privatization will allow the sector contribute in the field of manufacturing flour and feed by attracting local and international investors in order to raise operational efficiency and the introduction of new technologies and increase the competitiveness and increase employment opportunities and raise the quality of the product,” said Abdulrahman bin Abdul Mohsen al-Fadhli, minister of agriculture and chairman of GSFMO “It will also give the institution in the future the possibility of new roles in the field of strategic storage of food security.”

Most of the revenue of the private mills is expected to come from the milling fees charged to the GOG. The nine flour mills have a combined daily milling capacity of 12,630 tonnes of wheat and process about 3.3 million tonnes of wheat annually. The GOG is currently building several wheat silos to increase its total storage capacity to 3.7 million tonnes of wheat by 2016.

The GOG will remain the exclusive government agency to import subsidized milling wheat and will maintain ownership and operation of most of the wheat silos across the country. The GOG will manage the strategic wheat reserves and ensure food security objectives. The GOG is expected to privatize only a part of its grain storage silos to provide a smooth transition for the new flour mills. The rest of the storage capacity will be retained by the GOG for strategic reserve purposes.

The GOG will also assume regulatory functions in the wheat milling sector that will include:
– Setting the regulations concerning wheat flour quality;
– Inspecting flour mills to ensure compliance with quality regulations; and
– Regulating the competition among the private flour milling operators.